Coinbase CEO Armstrong dismisses rumors of possible US SEC ban on crypto betting
(Bloomberg) — Coinbase Global Inc. chief Brian Armstrong escalated his war of words with the U.S. Securities and Exchange Commission, warning that he had heard rumors that the agency wants to “get rid of” crypto stakes from retail investors.
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“I hope that’s not the case as I think it would be a terrible path for the United States if allowed to happen,” he tweeted on Wednesday, arguing that the practice of striking is “a really important innovation.”
The SEC declined to comment on Armstrong’s tweets. The agency has repeatedly said that most digital tokens are securities that should be subject to the rules. Chairman Gary Gensler has previously indicated that efforts may fall under the regulator’s remit. Armstrong argued that striking is not a certainty.
Staking involves earning rewards by unlocking coins to help order transactions on various blockchains such as Ethereum. Coinbase, Kraken and other crypto exchanges have invested in products to diversify their income.
The firms allow users to stake coins, without needing specialized computer equipment or having a minimum amount of 32 Ether, and take a share of the rewards. Investing in Ethereum can yield a return of around 6%. Coinbase has flagged the progress of its staking services to shareholders.
Last August, Coinbase revealed that it is being investigated by the SEC over its betting programs. The exchange is the second largest depositor of stake Ether, according to the tracker Etherscan. DeFi platform Lido Finance is the largest.
Armstrong has run afoul of the SEC in the past, for example over a crypto-lending product that the platform had to cancel due to pressure from the agency.
Staking services have gathered steam in recent months after Ethereum – the biggest commercial highway in crypto – switched to the so-called proof-of-stake method of ordering blockchain transactions last September.
The next phase of Ethereum’s development, an iteration known as Shanghai expected in March, will allow Ether holders to withdraw their stake coins.
Both crypto exchanges and decentralized protocols have offered their staking clients derivative tokens that trade at a one-to-one ratio with the ether coins they unlocked for returns. cbETH, the derivatives token for Coinbase users, fell over 3% in the past 24 hours, with Lido’s stETH and Rocket Pool’s RETH falling by around 2% respectively, according to data from CoinGecko.
Bitcoin uses an alternative computational approach known as proof-of-work, which is widely criticized for sucking up too much energy.
Proof-of-stake blockchains accounted for 23% of the total market value of digital assets by the end of 2022, according to a report by Staked and Kraken. The report estimated the value of pledged assets at $42 billion.
An SEC crackdown could drive investors away from centralized exchanges like Coinbase to decentralized betting services like Lido and Rocket Pool, which can be harder for regulators to figure out.
Coinbase was hit last year by a rout in digital assets and the fallout from the collapse of rival FTX. Coinbase’s shares fell around 86% in 2022. They have pared some of those losses by nearly doubling so far in 2023 alongside a rally in crypto assets. Coinbase fell a whopping 8.9% on Thursday.
For crypto market prices: CRYP; for the best crypto news: TOP CRYPTO.
–With assistance from Sidhartha Shukla.
(Updates token and shares performance.)
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